Weston Enterprises is anall-equity firm with two divisions. The soft drink division has an asset beta of 0.53, expects to generate free cash flow of $49 million thisyear, and anticipates a 4% perpetual growth rate. The industrial chemicals division has an asset beta of 1.02, expects to generate free cash flow of $72 million thisyear, and anticipates a 2% perpetual growth rate. Suppose therisk-free rate is 4% and the market risk premium is 5%.

a. Estimate the value of each division.

b. EstimateWeston's current equity beta

c. EstimateWeston's current cost of capital. Is this cost of capital useful for valuingWeston's projects? How isWeston's equity beta likely to change overtime?